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By Kaitlin Mara The importance of the Chinese economy as both a manufacturing giant and, increasingly, as a consumer of manufactured goods makes it clear that the country must play a key role in simultaneous global efforts to combat the threat of climate change and end the current financial crisis, a group of assembled delegates heard recently.

The “global economic system needs a China that is both strong economically and cleaner ecologically,” said Sergio Marchi, former president of the Canada-China Business Council.

He was speaking at the annual China Dialogue hosted in Geneva by the International Centre for Trade and Sustainable Development (ICTSD) on 27-28 November. The dialogue, entitled “China, Trade, and Climate Change,” focussed on the varied ways in which China fits into the global debate on environmental trade issues: as an important political player in the ongoing Doha trade liberalisation talks at the World Trade Organization and at the United Nations Framework Convention on Climate Change (UNFCCC), which met in Poland in December; as a potential actor in carbon-trading schemes; as an economic power but also a developing country with both growing energy needs and the potential to build ground-up infrastructure for greener financial markets.

United States Trade Representative Susan Schwab also sought dialogue with China recently, as she travelled to Beijing for a meeting of the US-China Strategic Economic Dialogue, which took place on 4-5 December. She, along with the US secretaries of the Treasury, agriculture, labour, health and human services as well as the head of the Environmental Protection Agency and others, met with high-level Chinese officials on economic growth amid macroeconomic risks, and ways to strengthen cooperative work on energy and ecological issues.

Among other outcomes, the US and China created seven “EcoPartnerships” between local governments, companies, and academic institutions to share best practices on sustainability and economic development. It was hoped that the meeting might also spur countries further towards common ground for a ministerial meeting at the World Trade Organization, which had been hoped for in mid-December, though the meeting did not end up taking place.

‘Patented in China’ Study

Thomson Reuters, too, has shown recent interest in China, as the organisation hosted a web conference in December to discuss a new study entitled “Patented in China,” which argues that intellectual property is becoming increasingly utilised as the nation’s economy shifts importance from manufactured goods to knowledge and innovation-based goods.

The analysis carried out by Eve Zhou and Bob Stembridge looked at patenting trends and concluded that Chinese invention is growing at a faster rate than any of the other major innovative regions (the US, Japan, Europe, and Korea).

The study also found that China’s government is an important driver of local innovation. Government investment in around 150 state-owned enterprises in 2007, for example, reached 27 percent of the country’s total national research and development spending for that year. The state owns almost all major academic institutions, which as a sector contributes a higher percentage of total patent applications to the national total than academic institutions in other countries, the study said. Also offered by the government are also hefty incentives for innovators in the form of subsidies and fee reimbursements that can be worth as much as a year’s salary, the authors said during the web conference.

Intellectual Property, Environment, and China

With the continued threat of climate change, new technologies likely will play a key role in any sustainable system, delegates heard at the ICTSD November conference. But environmentally sound technologies may only work when they work as whole packages: hardware and equipment, software, complementary technological systems, trained and qualified users, financial backing, an enabling regulatory environment and the intellectual property rights to use the technology, said professor Ji Zou, of the School of Environment and Resources at Remnin University in Beijing, who is also a delegate of China’s UN climate negotiations.

As a result, Zou argued, an innovative mechanism for development and transfer of environmentally sound technologies must be developed under the framework of the UNFCCC. Such a mechanism might include, among other things, subsidies for research and development in prioritised areas to investment in infrastructure to improve capacity to innovate in developing countries, including investment in human capital.

But the current IP system may not be ideal for creating this kind of mechanism, cautioned Zou, adding that compulsory licensing for environmentally sound technologies as well as special legal and regulatory arrangements for green technology should be in place to help implement climate change mitigating action.

George Weyerhaeuser, senior fellow of innovation and technology at the World Business Council for Sustainable Development, which hosts the eco-patent commons, said that tariff barriers of 4 or 5 percent do not seem to present a crucial block to technology flow, and that royalties from IP also are unlikely to inhibit technology flow around the world. The consternation around IP driven by “emotional moral feelings” he said are misplaced. Unfair competition can be dealt with by effective competition law, capable of stopping misbehaviour when it happens, he said, adding that the most important barrier to technology diffusion is “the learning curve.”

China is working to improve its legal system to encourage technology transfer for environmental protection, said Naigen Zhang, professor at the law school and director of the Centre for Intellectual Property Rights, both at the Fudan University in Shanghai. This includes a newly established ministry to coordinate the provision of environmentally sound technology, including necessary IP protection and licensing, he said. China issued a white paper on climate change in October detailing some of these changes, he added.